Photo: HT
Photo: HT

Stocks rally to one-year high as GST fuels optimism

Maruti Suzuki India and HDFC both rose to all-time highs; Asian Paints jumped to a record after its first quarter profit gained 19%

Mumbai: Indian equities climbed to the highest level in a year on sustained inflows from foreign investors amid optimism the government will be able to pass a national sales tax bill in Parliament.

Gati Ltd and VRL Logistics Ltd paced gains among companies that are likely to benefit from the proposed Goods and Services Tax (GST). Asian Paints Ltd jumped to a record after its first quarter profit gained 19% and the company raised the demand outlook. Maruti Suzuki India Ltd and Housing Development Finance Corp. (HDFC) Ltd both rose to all-time highs.

The Sensex surged 0.7% at the close in Mumbai, reclaiming the highest level since August 2015. Prime Minister Narendra Modi’s administration met a key opposition demand on legislation that would clear the way for the GST, India’s most ambitious economic reform since the 1990s. The US Federal Reserve left interest rates unchanged at the end of their meeting on Wednesday, spurring gains in emerging-market equities and currencies.

“Cabinet approving the GST amendment has led to optimism that the bill will go through," Anita Gandhi, a director at Arihant Capital Pvt. in Mumbai, said by phone. “The Fed kept rates unchanged overnight and our borrowing costs are not moving down immediately. So, the rate differential will continue, which is keeping foreign investor interest alive."

Fund flows

The benchmark index is headed for a fifth month of gains, fueled by $1.3 billion of inflows from abroad in July. Foreign funds have been net buyers in every month since March, the quickest pace since November 2014, as above-average rainfall improves the outlook for economic growth and food prices.

Gati rallied 6% to its highest level since 11 August. VRL Logistics climbed 3.6% and Allcargo Logistics Ltd jumped 6.7% to its highest level since 30 December. Transport Corp. of India Ltd soared 7.2% to a record.

Asian Paints soared 6.2%, the best performance on the Sensex. First-quarter profit rose 19% from a year earlier and sales increased to 4,030 crore from 3,660 crore a year earlier.

Good rainfall after two straight years of deficiency is expected to boost rural demand for the company, chief executive officer K.B.S. Anand said in an earnings call on Wednesday. The paintmaker expects to gain from the hike in salaries of federal staff announced in June, Anand said.

Maruti Suzuki added 4.5% to a record. HDFC and HDFC Bank Ltd, the nation’s most valuable lender, advanced to all-time highs. Sun Pharmaceutical Industries Ltd, India’s most valuable drugmaker, rose 2.2%.

The Sensex traded at 16.5 times 12-month projected earnings, the most expensive in 15 months. Bloomberg